Parties
Hometown Financial Group, MHC/Hometown Financial Group, Inc.
Hometown Bank, Easthampton Savings Bank
Hometown Financial Group, MHC is a Massachusetts mutual holding company registered as a bank holding company. Its status as a bank holding company results from its indirect ownership and control of 100% of the issued and outstanding voting securities of two depository institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”), Hometown Bank, Oxford, Massachusetts, and Easthampton Savings Bank, Easthampton, Massachusetts.
Hometown Financial Group, Inc., a Massachusetts corporation, is a wholly-owned, direct subsidiary of MHC. Hometown Financial also is a bank holding company under federal and Massachusetts law due to its direct ownership and control of 100% of the issued and outstanding voting securities of Hometown Bank and Easthampton Savings Bank.
Hometown Bank was founded in 1889. It is a Massachusetts stock co-operative bank, with its main office in Oxford, Massachusetts and 12 branch offices located in Massachusetts and Connecticut. Its Massachusetts branch offices are located in Athol, Auburn, South Lancaster, Leominster, Sturbridge, and two branches in Webster. Its Connecticut branch offices are located in Brooklyn, Danielson, North Grosvenordale, Putnam, and Woodstock. Hometown Bank is a member of the Federal Reserve System. At September 30, 2018, Hometown Bank had total assets of approximately $769 million.
Easthampton Savings Bank was founded in 1869. It is a Massachusetts stock savings bank with its main office in Easthampton, Massachusetts, and 10 branches, which are located in Agawam, Belchertown, Easthampton, Hadley, Holyoke, South Hadley, Southampton, Westfield, and two offices in Northampton. Easthampton Savings Bank is a member of the Federal Reserve System. At September 30, 2018, Easthampton Savings Bank had total assets of approximately $1.35 billion.
MHC and Hometown Financial have no subsidiaries other than Hometown Bank and Easthampton Savings Bank. Hometown Bank has three wholly-owned subsidiaries: Hometown Securities I, Inc.; Hometown Securities II, Inc.; and WCB Realty, Inc. Easthampton Savings Bank has three wholly-owned subsidiaries: ESB Securities Corp; ESB Investment Corporation; and Mt. Tom Properties, LLC.
Pilgrim Bancshares, Inc./Pilgrim Bank
Pilgrim Bancshares, Inc. is a Maryland corporation registered as a bank holding company. Pilgrim Bank was founded in 1916. It is a Massachusetts stock co-operative bank with its main office in Cohasset, Massachusetts, and two branches offices located in Cohasset and Marion. Pilgrim Bank is currently a nonmember insured institution, and is subject to regulation by the Division and the FDIC. The application indicates that Pilgrim Bank will be filing to become a member of the Federal Reserve System. At September 30, 2018, its total assets were approximately $266 million.
Bancshares has no subsidiaries other than Pilgrim Bank. Pilgrim Bank has three wholly-owned subsidiaries: 48 South Main Street Corporation, a Massachusetts investment corporation that holds bank-eligible investment securities; 40 South Main Street Realty Trust, a Massachusetts realty trust created in 2010 to acquire, renovate and hold the real property that is now where the Pilgrim Bank’s main office is located; and 800 CJC Realty Corporation, a Massachusetts realty trust established in 2009 to hold Pilgrim Bank’s other real estate owned (“OREO”); it currently has no holdings. 40 South Main Street Realty Trust is in the process of being dissolved.
Competition
The Petitioners have addressed the issue of whether competition among banks will be unreasonably affected by the proposed transaction. Part of that analysis includes various guidelines utilized by the federal regulatory agencies. The application contained an analysis under the Herfindahl-Hirschmann Index (“HHI”), a key test utilized by federal agencies in assessing the competitive effects of a proposed bank merger. In this case, the HHI analysis demonstrates that consummation of the transaction will not result in an undue concentration of banking resources in the Commonwealth. The Board’s review, however, is not limited to such federal standards. It is the practice of the Board to consider a transaction in light of its impact on the citizens, communities, and banking structure in the Commonwealth on a community-by-community basis. In that regard, Petitioners have presented information that the proposed transaction will not have a significant adverse effect on competition among banking institutions in any relevant market. Specifically, there is no overlap in the counties in which the banks operate. All of Pilgrim Bank’s branches are in Norfolk County, Massachusetts, while the two depository institution subsidiaries of MHC and Hometown Financial have branches in Worcester County, Hampden County, and Hampshire County, Massachusetts; and in Windham County, Connecticut. Upon review, the Board does not believe the transaction will unreasonably affect competition for the reasons cited, as well as the fact that a number of diverse financial institutions will continue to provide competitive deposit and credit services throughout the affected areas and banking markets served by the continuing institution.
Public convenience and advantage
The Board had also considered whether public convenience and advantage will be promoted by this transaction. For the Petitioners, the Merger represents strategic growth in attractive markets. The greater size of the combined organization will allow economies of scale in certain back office functions, which the Petitioners believe will result in greater efficiencies and superior service. Economies of scale in back office functions will allow the combined banking organization to compete more effectively than either organization on its own. In addition, the Merger will result in the introduction of a number of new products and services to the customers of Pilgrim Bank, including Remote Deposit Capture; Positive Pay Commercial Checking Accounts; Health Savings Accounts; Merchant Services; Instant Issue Debit and ATM Cards; Pilgrim Bank-Branded Credit Cards; a more robust Commercial Online Banking System with Wire Transfer and ACH Origination Capabilities; Commercial Online Banking System Services; Document Imaging Systems; Government Banking; and Non-Deposit Investment Products. To the extent that Pilgrim Bank does not provide a specific product or service, customers will have access to expanded products and services at the affiliated banks. Pilgrim Bank customers will receive access to 32 additional no-fee ATMs at Easthampton Savings Bank and Hometown Bank locations.
The Board has also considered the Petitioners’ analysis of “net new benefits” related to the transaction with respect to the statutory criteria. The term includes initial capital investments, job creation plans, consumer and business services, and commitments to maintain and open branch offices, among other factors. As noted in their application, the existing main office and the two branches of Pilgrim Bank will be maintained after the Merger. The Petitioners also noted in their application that they expect to retain substantially all of Pilgrim Bank’s employees thereby providing continuity for its customers and communities. As noted above, the application provides that the Merger will afford back office efficiencies for the banks, and should allow the resulting entity to compete more effectively and improve profitability for each institution, thereby providing funds for future plans for capital investment, job creation, and expansion of consumer and business services.
Related to the issue of public convenience and advantage is the record of CRA performance by the subsidiary banks of the parties to this transaction. Such a review for a state-chartered bank includes examination by personnel of the Division, as well as analysis of concerns received by the bank’s community and its response to those concerns fairly raised. For other institutions, the Board looks to a publicly available descriptive rating and evaluation by a federal or state bank regulatory agency. The Board has noted that Easthampton Savings Bank received a “Satisfactory” rating from the Federal Reserve Board (“FRB”) at its most recent CRA examination, dated June 19, 2017. Easthampton Savings Bank also received a “High Satisfactory” rating at its CRA examination, dated January 12, 2015, and conducted by the Division of Banks. Hometown Bank received a “High Satisfactory” from the Division and a “Satisfactory” rating from the FRB at its most recent CRA examination, dated June 11, 2018, and conducted concurrently by the Division and the FRB. The Board further notes that Pilgrim Bank received a “Satisfactory” rating at its most recent CRA examination, dated December 5, 2016, and conducted jointly by the Division and the FDIC. Accordingly, the Board’s review of factors related to public convenience and advantage are supportive of approval.
The financial and managerial aspects of any transaction are also a significant consideration of the Board, as they may affect the continuing holding company’s ability to serve the banking public, to actively compete with other financial institutions, and to maintain its capital ratio standards for a safe and sound institution. As set forth above, the Merger is a cash transaction, and the subsidiary banks will continue to be well-capitalized after consummation. Following the Merger, there will be no changes in the boards or management of MHC and Hometown Financial except that the MHC and Hometown Financial may consider increasing the size of their boards to appoint one or more individuals from Pilgrim Bank’s market area to fill the vacancies. The Board’s consideration of the financial and managerial aspects of the transaction also supports its approval.
Conclusion
The application, supporting documents, the testimony received at the public hearing, as well as additional information submitted, have established a complete record on this petition, which has been reviewed in accordance with statutory provisions and policies of the Board. Based on the record of this matter considered in light of all relevant statutory and administrative requirements, the Board finds that public convenience and advantage will be promoted, that competition among banking institutions will not be unreasonably affected, and that the record of performance under CRA by the subsidiary banks involved in this transaction are consistent with its approval. Having considered the record established on this application, the Board has found that the applicable statutory and administrative criteria have been met. In accordance with the findings expressed herein and pursuant to statute, the Board hereby approves the petition and authorizes Hometown Financial Group, MHC and Hometown Financial Group, Inc. to acquire Pilgrim Bancshares, Inc. and to directly and indirectly own and control its wholly-owned depository institution subsidiary, Pilgrim Bank, provided that the transaction is completed within one year of the date of this Decision.
Board of Bank Incorporation
Merrily S. Gerrish
Acting Commissioner of Banks
Deborah B. Goldberg
Treasurer and Receiver-General
Donald Twomey
Designee of the Commissioner of Revenue
